Yam said Bank of East Asia was highly capitalized and highly liquid, with minimal exposure to the troubles at Lehman Brothers Holdings Inc., the former Wall Street powerhouse being dismantled in U.S. bankruptcy court. Yam said depositors are well protected throughout Hong Kong's banking system.

Bank of East Asia executives said text message rumors about instability at the lender, Hong Kong's fifth largest by assets, began circulating Monday. The bank informed the HKMA and Hong Kong police but initially didn't go public to deny the rumors because executives feared that would lead to panic withdrawals.

"The rumors took various forms," said Bank of East Asia's deputy chief executive, Joseph Pang, at a news conference. "Some said the company's financials were problematic, and others said the government is about to take over our bank. Some others said there is a HK$10,000 (US$1,282) limit to each withdrawal. All of these are baseless."

Hong Kong Financial Secretary John Tsang also came to the bank's defense, calling the rumors "unfounded" and saying Hong Kong's banking system is well capitalized and sound.

Bank of East Asia's shares fell as much as 11.3% in the early afternoon, but the losses were pared after the bank and the HKMA denied the rumors. The blue-chip lender closed 6.8% lower at HK$25.60, on a day when the benchmark Hang Seng Index rose 0.9%.

Bank of East Asia posted statements in branch windows proclaiming it was sound. Some depositors read the statements and accepted the assurance, so they left without withdrawing money.

Others didn't believe the bank and said they would take out their life's savings.

The Lehman bankruptcy stirred protests earlier in Hong Kong by individual investors in mini-bonds who had believed their money was safe but instead suffered losses.

"After the Lehman Brothers incident...sentiment has become very fragile," said a businessman outside a bank branch who identified himself only by the surname Chan.

"So whenever there's any sign of difficulty in another financial institution, they'd come lining up to withdraw their money," said Chan, who had come to the bank for a routine transaction but gave up because of the long lines.

A mainland Chinese depositor, holding a bag and identifying himself as Mr. Zhang, said he had withdrawn HK$1 million.

"I came down from mainland China this morning to get some money out of my account," Zhang said outside the bank's headquarters, with a line of depositors stretching around the block.

"I wasn't aware of the news Bank of East Asia is in trouble, I just wanted to get some money out. I came to get around HK$40,000, but when I realized the situation with the bank, I got HK$400,000."

Asked why he had just lowered the amount of money he claimed was in the bag, Zhang said: "I don't want to get robbed."

A policeman on duty outside the bank to maintain order echoed concerns that some of the people making big withdrawals could be taking a risk by carrying so much cash. But many were willing to take that risk.

"I have worked eight years and put all my money into BEA," said a woman in the line who would not give her name. "I don't want to lose all my savings."

Pang said that despite the long lines, the amount withdrawn was "really small" because "those who queued up are mom and pop depositors." Pang didn't give an amount but said "no corporate clients have demanded withdrawals."

Pang said the bank's capital adequacy ratio of 14.6% was well above required levels.

Yam said the HKMA, Hong Kong's de facto central bank, would be ready to provide liquidity to Bank of East Asia if needed, but that no such request had been made.

Pang said Bank of East Asia's exposure to Lehman and American International Group Inc.
AIG, -0.11%
the insurer that was bailed out by the U.S. Federal Reserve, came to HK$472.7 million in total, or just 0.12% of the bank's HK$396.6 billion total assets.

Pang said the rumors didn't appear to have been "malicious" but he wouldn't discuss them further. Yam said he had no details about the rumors and would let the Hong Kong police investigate.

Hong Kong police said in a statement the case was under investigation but no one had been arrested. The police said that transmitting "a false message" in Hong Kong can be a crime.

Fund managers said the speed with which a few text messages could have escalated to a bank run reflects the current jittery climate that has gripped financial markets, with no end in sight.

"Hong Kong's regulation over banks is really tight, so the chances of having a bank go bust is very slim," said Francis Lun, a general manager with Fulbright Securities. "The problem is that there were recent instances where big, global banks vanished overnight, so every one just got panicky."

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